Governance reform at Japan’s private universities remains uncertain

By Ryosuke Tsunekawa and Kojiro Ito / Yomiuri Shimbun Staff Writers

13:25 JST, December 30, 2021

Governance reform at private universities is drawing attention, due to the multiple scandals seen in recent years at such academic institutions.

An expert panel established by the Education, Culture, Sports, Science and Technology Ministry has compiled a report calling for boards of councillors composed of outside members to be given strong supervisory authority over universities’ boards of directors. Under the Private Schools Law, educational corporations have to set up a board of councillors, but the board of directors is the decision-making body.

The panel’s report has spurred objections from private universities, and the fate of discussions on governance reform remains uncertain.

Experts seek change

The ministry panel’s members emphasized the need to reform the governance of private universities at a press conference held in Tokyo on Dec. 13. The press conference was arranged to respond to universities’ opposition to the panel’s report, which was released on Dec. 3.

“When a board of directors infringes on the pursuit of learning — for example, when a board chairman appoints a friend as a professor — education and research can be protected if the board of councillors says no,” a panel member said.

The key element of the report is that the board of councillors should be made the highest supervisory and decision-making organ at educational corporations that establish private universities and other schools.

In a scandal involving Nihon University — in which then board of directors chairman Hidetoshi Tanaka, 75, was arrested by the Tokyo District Public Prosecutors Office on suspicion of violating the Income Tax Law — the board of directors, auditors and board of councillors failed to restrain Tanaka, allowing him and others to treat the university’s large organization as if it were their own property.

In its report, the expert panel positioned the board of councillors as an organ that would hold the chairman and other members of the board of directors in check, by giving the board of councillors voting rights over budget proposals and business plans, and the power to dismiss directors and other executives.

The report also said that members of the board of directors, faculty members and staff should not be allowed to concurrently serve on the board of councillors, so that outside experts and key figures will supervise a university.

In response, private universities have argued that board of councillors members who are not in daily contact with students are not capable of judging the appropriateness of budgets and plans for education and research. They have also said that a system in which the board of councillors had the right to appoint and dismiss directors and auditors would be subject to abuse of power.

“A mechanism to allow the expulsion of a problematic manager in an organization will bring a sense of urgency to that organization,” said Chuo University law school Prof. Shuya Nomura, an expert on the Companies Law. “Separating the operation of a business from its supervision is key to [creating an] organization where governance works.”

Debate led by politicians

Politicians have initiated the current discussions on reforming the governance at private universities.

The discussions date back to when the Liberal Democratic Party’s Headquarters for Promoting Administrative Reform started talks on revising the Private Schools Law in the wake of a number of scandals at private universities, including irregularities in entrance examinations for medical faculties in 2018.

The latest Basic Policy on Economic and Fiscal Management and Reform that the Cabinet adopted in June called for concluding discussions on the reform of educational corporations by the end of the year, after which the law would be revised.

In response, the panel started discussions in July in which most of the members were lawyers specializing in the Companies Law and certified public accountants. No one from organizations representing private universities was appointed to the panel.

“The discussions were one-sided, and did not seeking a consensus with private universities,” a senior ministry official said.

Former Chief Cabinet Secretary Yasuhisa Shiozaki, who served as the chairman of the LDP’s Headquarters for Promoting Administrative Reform and led the reform discussions, retired from politics in October.

After the draft outline of the report was unveiled on Nov. 19, private universities pushed back through such measures as lobbying LDP lawmakers connected to educational issues.

During a hearing of representatives from private school organizations held at the LDP headquarters in Tokyo on Nov. 29, even lawmakers pressed the education ministry that the draft should have been one that could be readily discussed.

A ministry official said that coordination with the private universities and ruling parties is not easy.

Scandals continue

The Private Schools Law has repeatedly been revised to prevent irregularities and improve supervision.

According to the Promotion and Mutual Aid Corporation for Private Schools of Japan, there have been 27 cases in the past 10 fiscal years in which government subsidies to educational corporations that run universities and junior colleges were suspended or reduced, due to such incidents as irregularities on entrance exams and in accounting, as well as criminal cases.

For example, Tokyo Medical University was not provided with the government’s private-school subsidy in fiscal 2018 after irregularities on entrance exams and corruption in government-funded projects were uncovered.

In the 2014 revision, the supervisory power of the education ministry and other authorities was heightened so that the ministry and others can issue administrative orders and advisories for executives’ dismissal to educational corporations. The 2019 revision explicitly stated the liability for damage to a educational corporation caused by an executive who neglected to perform their duties.

Nevertheless, scandals involving private universities have continued to occur.

“The report’s focus on the separation of operation and supervision is not wrong, but each university will have a tough time securing members for its board of councillors,” said Motohisa Kaneko, a professor at the University of Tsukuba who specializes in higher education issues.

“In the future, there should be discussions about having a board of directors solely appointed from outside the school select the university president, and having the board of directors supervise university operations, a system seen at U.S. universities,” Kaneko said.